Tag Archives: the market

I’m in!

EUflagWith 5 days to go to the EU referendum, this may be a perhaps a little late. But it no longer seems tenable to host a blog about politics without commenting on the biggest political issue of the day. Indeed, the biggest political decision most of us will make in our lifetimes.

Despite knowing for months how I was going to vote, I’ve put off writing a blog because I felt I didn’t have all the answers or the expert knowledge. But that doesn’t seem to have stopped most people who have got involved in the debate. And the nearer the vote comes, the more I realise how important the issues are. So the time has come to stop hiding behind excuses. It’s time to say I’ll be voting to Remain in the EU and to untangle the arguments to show you why.

Capitalism

I’ve never really understood why the call to leave the EU should come so strongly from the Conservative party. Our modern neo-liberal capitalist society is epitomised in the EU. A free market unfettered by trade barriers and tariffs. A place where the price of goods and services are set by the market, just as wages are. Where jobs are created by the supply and demand of the market, and people are free to move to where the jobs are. The capitalist free market works only where you have free movement of goods, capital and people and the EU is a massive free market zone. If that’s what you believe in, why on earth would you want to leave it?

Actually, I suspect most of those on the Leave side don’t really want out of this neo-liberal paradise. They have other reasons for leaving, and are busy trying to make sure that we will still be able to be a part of this unfettered market by negotiating our own individual trade deal when we leave. However, if we really want to continue with a tariff-free trading arrangement for our goods and services into the EU, we are going to have to agree to stick with the free movement of capital and people too. That’s how it works. That’s how it works for Norway, and for Switzerland. We’re not going to get a better trade deal with the EU by refusing to sign up to all the rules of the club.

Running close alongside this argument, is the idea that leaving the EU will free us up from the EU’s bureaucracy and red tape. Now, this is something I have dealt with in a blog. In short, if we want our goods and services to be acceptable to an EU market, they will have to comply with EU regulations. And most of this red tape is more like gift ribbon, protecting workers’ rights, quality assurance, our health and safety and our environment.

I’m really not a fan of neo-liberal capitalism, but we’ll still be stuck with it even if we leave the EU. So that’s not the argument for me.

Social Chapter

Somewhat paradoxically, the EU is also the source of much that has a left-wing feel about it. I guess that’s what happens when you’re working with the French. Things like the Social Chapter, protecting pregnant and part-time workers, and the European Working Time directive, protecting over-time pay. Not every flavour of government in this country would work to bring about these kinds of protections, so I’m glad of the EU in this case.

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During the debate, there has been a lot of talk about the amount of money it costs us to be
part of the EU. The figures have been hotly disputed and like has not been compared with like. But it is clear that the amount of money that leaves the UK and goes to Brussels is a very small percentage of government spending (less than 2%). And a lot of it comes back. A lot of it comes back to things that I don’t believe the current government would spend it on, and things I know for sure that previous governments of the same type wouldn’t have spent it on. Having lived there for 14 years, I saw transformation in Liverpool through EU money, as Capital of Culture and other projects. And we also found out that one Mrs T’s preferred option for Liverpool was one of ‘managed decline’.

Now I’m in Yorkshire, where the local news compared money leaving the region for Europe to money coming in. Pound for pound (or euro for euro!) more money goes to the EU per head for Yorkshire and Humberside than comes back in inward investment. But financial benefits of the resulting jobs from that investment is harder to quantify. Would the same money have been spent in the region by the UK government if it hadn’t got to Europe? It seems unlikely, as the region received 3% less government spending than the national average. It seems the EU is more likely to deliver than any so-called Northern Powerhouse.

Leave campaigners can suggest all kinds of things they would like to spend money on which is saved by leaving the EU. But only whoever is in power if we leave will actually decide where that money goes. Economists predict our national income will shrink if we leave. If so, any savings will be swallowed up in a smaller economy. But even if there is some left to spend, George Osborne doesn’t have a strong track record of generosity to the needy, and in this arena, I trust Boris Johnson and Michael Gove even less.

Do I really mind giving money to the EU? Actually, no. I’m sure there are inefficiencies and wastage. (Is it really a good idea to decamp to Strasbourg every few weeks?) But just as our money comes back to us in funding for research, and investment in deprived places etc, so our money is spent on even more of these projects in other EU countries where the need is even greater than ours.

Democracy

There are complaints that the EU is undemocratic. Only one of the bodies involved in legislating is unelected – the European Commission which proposes and drafts EU legislation. It functions rather like our civil service. EU heads of government (the European Council) set EU priorities, and the EU parliament and council of ministers debate and vote on legislation.

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How the EU works

I’m afraid I can’t get too worked up by this argument, when we live daily with our own ‘democratic deficit’ in the UK. A system which returns governments elected by only around a third of those who voted and less than a quarter of all those eligible to vote has a democratic deficit of its own. Both need reform, but that’s never going to happen from the outside.

Perhaps there is an EU democratic deficit, but mainly on our part. How many people know who their MEPs are? Have you ever written to them, asked them to intervene on your behalf? I’ve had a great response from my MEP, Linda McAvan, when I’ve contacted her. She’s been involved in bringing about legislation to regulate the mining industry (top culprits in sucking resources out of poor countries) and making sure minerals used in electronic technology are traceable and haven’t been used to fund wars (so-called conflict minerals).

Standing together

I’ll admit this is a bit niche, but it is the kind of the thing the EU can do, which countries on their own can’t. Which finally, after two pages of this stuff, brings me to the real reason why I’m in. Maybe we could do this on our own, but we can do it much better together.

Immigration has coloured and clouded this debate from the start – as it has UK politics for a while. We haven’t debated this issue wisely or well. There is a lack of clarity but plenty of shouting.

I’ve done quite a bit of shouting myself, mostly at the telly, mostly about words. But words matter, and lots of words in this debate are used interchangeably, when they shouldn’t be. So I’m actually going to start with the word ‘refugee’. The crisis facing Europe at the moment is a refugee crisis, not a migrant crisis. The streams of people desperate to enter Europe are fleeing violence, war, persecution and starvation. Mostly they come from Syria, Iraq, Eritrea and Afghanistan. Their homes have been destroyed, they are not safe because of their religion or their politics, or because their government is attacking them or is unable to prevent others from attacking them. Their children cannot go to school, they cannot access medicines or food. By any measure, these people need our help, they need refuge, the country they call home is no longer safe, and they have a right to ask for safety elsewhere.

There is not one country which could help all of these people, though it looks like Germany has tried. But the EU could and should act together and provide refuge and safety. I want to stand in solidarity with my European neighbours to act in support of those who are fleeing. But actually it feels like we have already left Europe on this issue, refusing to agree to welcome our share of needy people, opting out of agreements to help. The EU has not handled this situation well. But I believe in the UK we have handled it even less well, and it is this lack of solidarity and sense of humanity which has made it worse.

All of this is quite different to people moving to the UK to look for work or opportunity. Most of this is pretty well regulated, certainly when it comes to people from outside the EU. And I think I’ve already dealt with EU migration in the discussion above. I don’t believe for a minute that the EU will give us any kind of trade deal without including the free movement of people. So if we want to trade with the EU – in or out – it won’t make any difference.

There are other global issues where we need to continue to stand together to make a difference. The biggest crisis facing the world right now is climate change. We will make much more progress in cutting carbon emissions and halting global warming if we work with the EU than if we work alone. We’ve already benefitted from the EU’s work on the environment now that we have clean beaches to enjoy. So we know we can make a difference. I guess the EU could carry on this work without us, but we have a crucial role to play within the EU. We can be leaders on this issue in terms of technology and our grassroots movements of activists. If we stand alone, we are both poorer for it.

Who are we?

I think we have forgotten that we are in the EU not just for what we can get out of it, but also for what we contribute to it. And here, I’m not talking about money. What does it say about us if we decide to stand alone? I think we already know a bit how it feels because we have been so ambivalent about the EU for so long already. We already know we are unloved because no-one votes for us in the Eurovision Song Contest! To leave is to shut the door on friendship, partnership and working together. Sure, we can still work with our European partners, but what is the message we are giving off?

To leave is to say that we don’t belong, that Europeans are different, foreigners, other, and we don’t want any of that over here, thank you. Where is our famed British tolerance when we turn our backs on our neighbours? To remain is to say that we want to be part of a European future together. We do belong, we have shared history, shared ambitions for peace and stability in the future of our continent. We need to choose to stay, and we need to choose to embrace Europe. To give of our passions, of our wisdom and yes, of our wealth. To support parts of Europe where poverty stubbornly digs its heels in. To stand firm with our neighbours against the rise of hate-filled, racist far-right ideologies. To remember that we are a country of compassion and take care of frightened people looking for a safe place to call home. To get our hands dirty and get involved and be prepared to say we are European.

If we leave, both the UK and the EU will be diminished, as the poem below expresses so well. I hope and pray that after next Thursday the bell will not be tolling for us.

No man is an island,

Entire of itself,

Every man is a piece of the continent,

A part of the main.

If a clod be washed away by the sea,

Europe is the less.

As well as if a promontory were.

As well as if a manor of thy friend’s

Or of thine own were:

Any man’s death diminishes me,

Because I am involved in mankind,

And therefore never send to know for whom the bell tolls;

It tolls for thee.

John Donne

The price of a free market

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As you do, I’ve been thinking about free market economics. So my thoughts turned to the Conservative party, the party of Thatcherism, natural home of free market economics. You’d think. But wait, what’s this? David Cameron wants to stop the free movement of people in the European Union. Well, he can’t have it both ways.

In a free market, prices reach equilibrium between supply and demand – how much they cost to produce and how much people are prepared to pay. This is tied up with the labour market. Wages are determined by supply of and demand for labour, and the cost of wages impacts on the cost of goods. In order for the buying and selling processes of the market to reach a fair price, there should be no barriers to such buying and selling. Otherwise this distorts the true market value. And for prices to reach equilibrium, labour must follow the work, or workers become scarce, wages rise and prices rise. For the market to work, people need to move to where the jobs are in order for supply and demand to keep up with each other. So, we are apparently governed by a party which believes in free market economics but no longer wants the free market to operate in Europe.

I am by no means a defender of free market economics, but if you want a free market, then you need a free market. Restricted movement of people around Europe is not a free market. If you want to intervene in the market, be my guest, I think it’s important that we do. But then you’ve conceded the principle that the market cannot be left to its own devices for the good of society, and it’s no good pretending you haven’t.

And here’s another reason why we can’t leave it to market forces. Openly stated on BBC news last night, in a report about the spread of the Ebola virus in West Africa, the reporter said that, until now, the virus had not affected enough people to make it worthwhile developing a vaccine. He meant financially worthwhile for the pharmaceutical industry, but that doesn’t really matter. In a free market, there must be thousands of people at risk of dying before it’s worth investing any money in order to save them. Because otherwise the company won’t make enough money. Well, that’s business, you cry. But that is precisely my point. What’s good for business and the free market isn’t the same as what’s good for people and society. Developing a vaccine for Ebola should never have been left until it made market sense. This is where public money should be spent for the good of all.

Not all our financial decisions should be left to the processes of free market economics. Some decisions are far too important for that.

 

Psst! Do you want to know a secret?

It’s been quiet on these pages over the summer holidays. Not that stuff doesn’t happen, but getting up late and being out of the country means I’ve missed most of it. The terrible distressing stories from Iraq, Syria and Gaza haven’t gone unnoticed, but I haven’t felt able to make an informed, helpful comment on these issues.

Something else has been slipping by unnoticed, though. I expect it has slipped by most people, without them ever realising it was happening. I’m talking about TTIP. See – you’ve still no idea what that is! And if I tell you it stands for Transatlantic Trade and Investment Partnership, are you any the wiser?

It is a deal being negotiated between the US and the EU to removed barriers to trade between the two regions. So you’d expect this blog to have something to say in criticism of an unfettered free market. And I do have a problem with the elevation of “the market” as the solution to all our problems, economic at any rate. But my problem with TTIP runs deeper than this.

For a start, there’s the fact that most people have never heard of it. Negotiations are being carried out in secret, and most of our MPs don’t have any idea about the details of the deal. Its remit is wide ranging, and it needs to be subject to scrutiny. In the interests of democracy, the general public should know what is being discussed, understand its likely impact on our society, and have a say in whether they agree with this or not.

I have more concerns because most of the “barriers” to trade between the EU and the US are in the form of the higher levels of safety standards, environmental protection and workers rights which we have in the EU. Clearly it is better for business if standards are regularised, so that products are compliant across both regions. But lets guess which way standards are likely to change in areas where they differ.

Another aspect of the deal would be to force public services to open themselves up to private companies bidding for contracts, removing any option for governments to choose to keep them in public ownership. Maybe you think private ownership is a good thing, maybe you don’t. Right now, that’s a debate that is raging in the UK with regard to the NHS. If this deal is agreed, there will be no debate, and the NHS could soon be in the hands of American private healthcare companies.

TTIP could prevent better laws to protect our environment and combat climate change
TTIP could prevent better laws to protect our environment and combat climate change

But most insidious of all is the erosion of government power to introduce legislation to protect workers, consumers and the environment. If governments want to implement a living wage, or raise standards for air and water pollution, for example, and a business feels this will impact on their profits, they will be able to sue that government. Not through the usual channels of the national court, but by taking them to an ad hoc secretive arbitration panel, overseen by corporate lawyers. Businesses already hold way to much sway over government policy. This further diminishes government’s ability to make policies for the public good, where people’s taxes will end up paying for corporations to keep the law.

I don’t think you need to be against free trade to recognise that this deal, as it stands, is bad news. Large multinational corporations don’t need more power. It is difficult enough to make sure they pay proper taxes, don’t exploit their workers and take responsibility for tackling climate change and taking care of the environment. And we certainly don’t want to be handing over power to big business in secret without knowing what is being negotiated and given up on our behalf. The secrecy and the strait-jacketing of our elected governments make this deal an attack on democracy.

If you’d like to raise your voice in opposition, you can join the campaign on the 38 degrees website. If you’d like to read more, try George Monbiot or this blog.

Who benefits from benefits?

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It’s time to tell a different story about where public money goes and who benefits from benefits. We need an alternative to the current narrative from the government about “hardworking people” who “do the right thing”, who end up paying for those who aren’t working. However, the chart above shows that the spending on people on the edge of society who are working hard looking for a job is a very small part of social security spending. And the changes to Job Seekers Allowance means that it can be very hard to do all the right things required of you to avoid a sanction. (I took the chart from this blog and the information in it comes from this government paper on page 57).

Huge amounts are spent on pensions, but I’m not going to go there…

Four times as much money is spent on housing compared to unemployment benefits, and the housing benefit bill has been steadily rising. Housing benefits pay rents which people would otherwise not be able to afford. But this safety net means that rents can rise as they are not held back people’s ability to pay. This is the logic of capping housing benefit, so that it doesn’t continue to fuel rent rises. But who suffers the most with this policy? Those who can’t afford to pay rents. This takes power away from the already pretty powerless, and cedes more power to the powerful. Those with little power or money have little choice and are at the mercy of uncaring landlords providing poor accommodation. Meanwhile hundreds of thousands of pounds of public money is being paid to wealthy private landowners, making the rich richer, as this article explains.

Capping rent not benefits would cut the benefit bill but this time the change to the balance of power would be in favour of the weakest. I don’t believe that we should kneel before the altar of the market, but if we want to use market forces, a better way of reducing prices would be to increase supply, especially as rising prices can’t diminish demand of what is an essential rather than a luxury good. This means building more houses, which would also increase employment. And as it would be a good idea to make sure these houses were affordable and not susceptible to soaring rents, why not let them be council houses?

We need to join the dots. Giles Fraser writing about why the church should be angry about welfare policy, says that homelessness in London has risen by 60% in two years. We do have choices, and I believe we need to make choices which don’t just make economic sense, but choices which protect the most vulnerable in our society. So in this case, that is the tenant and not the landowner.

And while we’re on the subject of public money going to already wealthy private individuals, lets join some more dots up and widen it out to private companies. Take another look at the chart above and the figure paid out to families and children. Some of this will be child benefit, a universal benefit. There are good reasons to keep benefits universal, not least so we all have a stake in our society, but that’s another subject. The rest includes child tax credit and working families tax credit. This is paid as a “top-up” to ensure low-paid families can still afford a reasonable standard of living, and tries to ensure being in work pays more than not being in work.

This is somewhat at odds with the government’s narrative. Hardworking families who are doing the right thing still need to claim benefits, because they are not earning enough. Maybe this is to do with working part-time because of issues around childcare. Or maybe because there are only part-time jobs available (I talked about underemployment in my last blog). But plenty of these benefits are paid out to people working full-time but still considered to be earning too little for a decent standard of living. How can this be? How can it be that it is possible to work full-time and still not be able to afford to pay the bills and feed your family? Surely that’s why we have a minimum wage? But sadly, since its introduction in 1999 its value in real terms (taking into account rising prices) has been declining since 2010. An independent body calculates the hourly rate required for someone working full-time to earn enough for a decent standard of living, and this is know as the Living Wage.

Meanwhile, non-Living Wage employers are paying minimum but inadequate wages, which need to be topped up out of public funds. Some of these employers may be small businesses struggling themselves, which is why the Living Wage is a voluntary scheme. But plenty of these businesses are large firms making large profits. Supermarkets are a classic example. A quick scan of the list of living wage employers did not reveal any supermarkets to me, and yet they are posting huge profits. Profits built on low-paid workers subsidised by public money.

I don’t know what difference my little blog will do. But we need to talk about these things. We need to challenge anyone who says we cannot afford our welfare bill. Protecting the vulnerable is a key function of a civilised country. Our spending needs reform, but reform should protect the interests of the weak not the powerful. We are all stake-holders in a system which protects us when times are tough. The powerful have the capacity to protect their own interests, and they are doing very nicely at this thank you very much (Church Action on Poverty estimates tax dodging costs the UK at least £45 billion a year). A lot has been said this week about the morality of welfare reform. The Bible is full of exhortations to support the poor and the weak, to be a voice for the voiceless, especially the Old Testament. But I came across this the other day. Right at the heart of his plans to spread the message about Jesus, Paul says this: “All they asked was that we should continue to remember the poor, the very thing I had been eager to do all along.” (Galatians 2:10, NIV)

Target Market

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Two stories on the radio news this morning have given me hope – hope that as a society we are slowing waking up to the fact that “the market” is not fit for purpose in many areas to which it has been extended. The first was a criticism of how broadband has been rolled out into rural areas in the UK. Apparently, the government has not regulated the market sufficiently to allow proper competition and the best price for all concerned. “What’s that?’ I hear you say. “Government intervention in the market is necessary at times to ensure that it works for the benefit of all?”

The second story was about how computer games marketed to children are exploiting them. This is because many games are free in their basic form, but then to continue in the game and to be able to play it properly, you have to buy more and more add-ons, which turns out to be very expensive. Again, perhaps there is a realisation that it is inappropriate to apply the usual rules of the game when selling to children. There are things which we value more than can be expressed via market mechanisms, such as our children. Common Cause has already identified advertising at children as an issue which should concern us all. For more on how the market has reached far into areas where its values distort and diminish what we truly find valuable, I highly recommend this book: What Money Can’t Buy by Michael Sandel